S&P 500 Index Forecast: AI Hardware Leads Rally to 8,150

Heat Map Shows Rotation

We are seeing mixed performance in today’s trading session. Broadcom is up 4.85%, Apple is up 1.93%, Meta is up 1.12% and chip linked names like Qualcomm, Cisco, Lam Research and Applied Materials are doing some good work in the green. But we are seeing some software stocks take a beating. Salesforce is down 5.68%, ServiceNow is down 7.26% and Microsoft is down 3.68% with Alphabet which is also down 2.45%. Breadth is all over the place today. Overall we’re seeing the S&P 500 Index up a little over 10 bps.

AI Hardware Leads While Software Drags

JOLTS Beats Forecast

The JOLTS print was strong. There were 7.618M job openings versus a 6.88M forecast. So there’s no recession signals from the labour market that’s for sure. There may also be no need to consider any rate cuts in the short to medium term. The US economy is trodding along just fine.

JOLTS Shows Labour Demand Is Still Firm

Yields Helps The Bulls

Yields are downtrend in the short to medium term as exhibited by the Renko bricks being below the Supertrend line, the 21-EMA and 50-SMA. It’s sitting quite snuggly below the 50-SMA actually. Momentum is trending lower so there’s no set of pick-up in yields just yet but the Z-Score SMA is near exhaustion levels. Additionally we still see the US 10-year yield above the long-term 500-SMA. So all in all this just looks like a slight pullback in yields.

10-Year Yield Pullback Supports Growth

S&P 500 Renko Bricks Continue to Push Through

Another day, another all time high for the S&P 500 Index. The Index continues to move higher, brick by green brick. The Index is above its Supertrend line, 21-EMA, 50-SMA and 500-SMA. The RSI is above 65 and pointing higher. But I continue to stress on the bearish divergence on the Z-Score SMA. Something’s gotta give. Is it a false signal or are we heading into a short term pullback for the S&P 500. We do see fading market breadth with only 51% of S&P 500 stocks above their 20-day SMA. A cross below 50% would signal a short term pullback. Nothing to scream about though. Not more than 3% in my estimates.

S&P 500 Index Renko Breakout Stays Bullish

The Verdict

Current Trend Direction: Bullish

Bias: Positive

Support Levels: 7,240, 6,780, 6,310

Resistance Levels: 8,150, 9,280

Medium Term Path: Brick by Brick the S&P 500 is approaching the 8,150 level. There is some bearish divergence on the Renko and short term market breadth is bouncing around 50% so that’s not a good sign. We may get a small pullback in the short term but that does not take away from the overall trend of the S&P 500 Index.